HMRC has issued an invitation to participants in certain tax-planning schemes to settle without going to litigation. Initially the offer only covers a very limited number of schemes.

The category of schemes includes the use of General Accepted Accounting Practice (GAAP) by companies, sole traders or partnerships to create asset depreciation costs and reduce their taxable profits. Other schemes subject to the amnesty are those relying on film production expenditure relief, and those that create partnership losses from first year allowance reliefs, restrictive covenant payments, and certain capital allowances.

Similar arrangements may be extended in future to participants in film partnership sale-and-leaseback schemes, and interest relief schemes based on S353(1) ICTA 88, though HMRC has not yet decided. HMRC says its aim is to restrict relief so that expenditure which is not part of the real economic cost borne by the participants will be excluded when calculating losses or capital allowances. Only amounts equivalent to the actual cash contribution funded by the participant and expended in the claimed trade will be allowed when computing losses or capital allowances.

Reliefs will probably not be allowed where the scheme participants have paid fees for tax advice or litigation protection. Some specific schemes that fall into the above categories are, however, expressly excluded from the amnesty. The offer has been prompted by HMRC’s successes in some recent litigation, notably Tower MCashback, and the film partnership cases Eclipse no.35, Icebreaker no.1, Samarkand and Alchemist. HMRC plans to contact all eligible individuals by the end of January, and says it is prepared to settle with individual partners in a scheme even if the partnership as a whole declines the offer.

Those who decline to settle will see the agency ‘increase the pace of our investigations and accelerate disputes into litigation,’ it said, though no specific deadline has been set.

It’s not easy being contrary. But it is where profits are often found.

Take Russia, for instance. It’s a market that has been on a downward slope for much of the year as global investors fret about what’s to come with new elections – now that former-President Vladimir Putin is looking for another tour of duty.

That kindles bad memories of iron-fisted Russian premieres of the old Soviet Union.

And just this month, protestors began taking to the streets of Moscow and St. Petersburg and clashing with police in the aftermath of questionable parliamentary elections.

It’s in moments like these, when non-economic turmoil upsets markets, that you often find the best opportunities.

Russia is the cheapest of all the so-called BRIC nations today. It’s benefiting from what I call “micro booms” – this one in the consumer and in resources and this micro boom means that 2012 will be a good year for Russian stocks.

I was sitting in a small conference room in Zurich, talking with Alex, the former head of private banking in Moscow for a major Swiss bank. Having spent years living and travelling in Russia, he has a knowledge base of the country as deep as Russia’s winter freeze.

Today, Alex still invests in Russia for ultra-high net worth private clients from his office in Switzerland. I searched him out because I wanted a non-American view of Russia.

It’s very easy for American equity analysts to allow cultural prejudices to color their thinking about Russia, especially because of all we’ve gone through with the Great Bear during the Cold War and beyond.

Indeed, Americans like to cut-and-paste their own Western economic and political values and apply them to the rest of the world. That leads them to miss opportunities, because they’re looking at the country through a distorted lens.

Europeans see Russia from a different perspective. And Alex’s take is that “Russia is cheap.”

Back in my hotel overlooking Lake Zurich, I pulled up a list of major Russian stocks to gauge their valuations and see just how cheap they might actually be. And they are cheap – by any measure … and ridiculously so.

I found gads of stocks with P/E ratios in the low- and mid-single digits. The MSCI Russia index, which tracks the market as whole, is now trading nearly 50% below the 10-year average. That’s the kind of cheap that presumes everything in Russia is headed in the wrong direction … but that’s not the case.

Russia is in a pretty good position, economically. Its economy is deeply reliant on oil, and oil-price movements exert big influence on its stock market. At the moment, there are worries about recession in Europe and whether that flows through America and, ultimately, through oil prices.
but that’s the short-sighted view.
America and Europe are busy increasing their money supply, and oil prices will move higher, relative to the dollar – since the two tend to move in opposite directions. And that, ultimately, is good news for the Russian economy and its stock market.

Credit rating agency Fitch have said that “A solution to the Eurozone debt crisis is beyond reach” and the are reviewing the credit rating of 6 Eurozone countries including Spain and Italy.
Will that be an end to the anglo-french bickering?

While the World Economic Forum has taken up pages of the world’s leading business press another far less reported conference took place in San Antonio, Texas. Hosted by the American Bar Association, the conference laid out the plans of the US Department of Justice (DOJ) and US Internal Revenue Service (IRS) in their ongoing battle against privacy and competitive taxation.

The consensus is truly worrying: the UBS and Swiss Financial Markets Association’s divulging of private client information to the USA (which has since been ruled illegal by the Swiss courts and about which I have written here before), Tax Information Exchange Agreements, blacklists and economic blackmail are all just the start of this concerted effort to stop individuals benefiting from employing competitive jurisdictions for business and investment.

Some items of note were the new “Joint International Tax Shelter Information Centre”.

Tax departments from Australia, Canada, Japan and the UK are ganging up with the US IRS to conduct what the IRS calls “holistic taxpayer analysis“. This rather flowery name hides what can only be described as multi-lateral state sponsored invasion of privacy and entails a thorough scrutinizing of all personal and business holdings and interests of the individual in each and every jurisdiction simultaneously. This coincides with the opening of 11 new international IRS offices around the world, with Switzerland and Panama already earmarked as 2 countries to get their very own branch of the US tax office!

The UBS saga began primarily with a tip off from a disgruntled former UBS employer, Bradley Birkenfeld. I imagine the proximity of these new IRS offices is to encourage just that sort of behaviour. Some food for thought, however, for anyone who feels they would like to pop in and have a chat with their new local IRS branch: Birkenfeld has been sentenced last month to over 3 years imprisonment for his help.

I have written before that a swiss banker that I know, no longer takes US citizens as clients as it is too much effort. Well, new legislation which is being enacted currently by the US government with the wonderful acronym of FATCAT, seems designed to spread this sentiment by making it totally cost prohibitive for almost all foreign banks to hold US owned accounts, Though the Foreign Account Tax Compliance Reporting Act (FATCAT) which should enter in to US law in the next few weeks, may also have the unwanted effect of stopping or curtailing foreign investment in to the US markets as compliance cost rise for international brokers and investment groups, One could argue this could be counter productive however much extra tax revenue is raised, as the US economy struggles out of recession and the Dollar remains weak, is a further drop in demand for the currency, US stocks or treasury products what is wanted or needed by the US taxpayer, sovereign wealth funds or international investors alike??

John Fry.

John is the Business Development Director of Formcos-Russia a unique trust company offering trust and tax planning services internationally from Moscow.